Venture capital is not the only answer. But it is one of the few answers if you want to take your business to a materially different level. Many other financial routes are closed in the current climate and non-financial adjustments, while potentially positive, will not have the same impact.

Hiring attracts entrepreneurs. The UK is undoubtedly one of the world’s hiring centers. There are more agencies in London than in the entire United States, but that makes it difficult to stand out from the crowd.

Venture capital vs bank loans

Taking a significant step forward with a business usually requires some type of investment and, in general, there are 2 recognized financial routes. The first is a bank loan and the other is venture capital (or private equity).

If you go the bank loan route, keep in mind that since a recruiting company is not an asset-backed company (aside from its debtors, who normally attract financing for working capital), it has never been easy to borrow money. against the future profits of a recruiting company, given that assets leave the office at 6pm every night and hopefully return the next day.

Traditional banking has never been more difficult than now. Many cases have been reported in recent years in which companies have borrowed from a bank, have been able to repay interest, but have breached the long list of bank covenants. These deals are intensively scrutinized by very enthusiastic analysts, who seem all too willing to press the alarm bell, dispatching the bank’s friendly business support team. In turn, this often leads them to call in administrators … and the rest is history … in many cases.

To be sure, the dangers of borrowing from banks have never been greater, peppered with high fees, terms, key ratios, and draconian penalties, if you can get past the hurdle of getting one in the first place.

The alternative method of obtaining financing is to attract an investor, such as a venture capitalist, whereby you sell a portion of your equity in exchange for a long-term investment. However, this is not a piece of cake either. However, it is generally considered the best credible alternative to a bank loan.

Venture Capital Specialist Benefits;

Knowledge; If you choose an experienced venture capitalist, or preferably a focus, in your chosen market you will get a partner with considerable practical knowledge and experience.

Advice and tutoring; Their experience will be of great use in terms of acquisition or strategic advice, management infrastructure, succession planning and, of course, exit. If you have not been part of an outing before, an experienced partner will be invaluable, both with practical advice and with business preparation and contacts in the market. Then, they will not only add value overall, but also unlock equity value, a specific skill that many homeowners don’t have yet, because they haven’t needed it.

Understanding; The right venture capital partner will take the time to understand your business. If they have experience in the recruitment industry, they will understand the cause and effect of specific recruitment issues such as seasonality, pay cycles, and churn. Therefore, they will make more informed decisions and understand that the assets of the business are the people.

Additional financing; If additional financing is required in the future, then a VC will provide significant support either by increasing bank loans or by investing more themselves.

Contacts and networks An investor, especially one well connected to the recruitment industry, should be able to tap into their wide range of contacts through their business networks, from PR agencies to banks, from accountants to marketers. All who can help take your business to a new level and beyond.

Summary

Attracting investment can accelerate your business growth exponentially. If chosen wisely, it can help support your plans and alleviate some of the stress from top management.

Traditional bank loans are difficult to obtain now and they are inflexible. I would also say that they are light in terms of added benefits. VCs can add real value from their experience and contacts, especially if they are experienced industry professionals who have held executive management positions and have practical experience adding value. Additionally, when a VC invests their own money, they can be assured that their commitment to creating wealth for all stakeholders in equity capital will be 100%.